Legalities of Mergers and Acquisitions
21 Jun, 2012
Consulting legal experts is essential when planning an M&A strategy for your Hispanic small businessIn the previous installment, I outlined Hispanic business some insights which included planning, thought and strategy involved in mergers and acquisitions (M&A). This time, I’ll examine the legalities to be aware of when considering M&A.
Finding every NDA, MSA, lease or contract you have ever signed, crunching every number to smithereens, working out every detail, flailing around in a swamp of legal jargon, this is tough stuff. And you have to do this while still running your business–it’s like Ginger Rogers–she did everything Fred Astaire did but backwards and in heels. This is particularly true because it is likely that the people on the other side of the table are probably going to be very experienced in M&A and chances are good that you are not. They do this all the time and chances are you will do this only once.
This is where having access to sound legal minds can make a huge difference. Honestly I would say that having access to good legal counsel will serve you well throughout your business life. You need to protect your business name, your intellectual property, which includes the names you trademark for your key products and services, your URL names and website copyright content. You will also need occasional review of documents sent to you by your clients or vendors. And when (and if) you get around to selling your company, legal counsel will be extremely important.
Surviving the acquisition experience can be enhanced by keeping the long-term view. Occasionally some Hispanic entrepreneurs will win the lottery and strike it rich. Many fail completely. Most fall somewhere in between–the bell curve seems to always prevail, somehow. So you might not get what you want, you might have to wait to get what you want, you might have a lot yet to prove to the acquiring party. Many deals are based not so much on up-front cash as they are on earn-out. That means you have to prove that the acquisition was a good deal, that you can produce in the new environment. It might not sound entirely fair to you because you won’t always have control over the factors of success, but it is likely that if someone is going to go through the trouble and expense of acquiring you, they will want you to succeed.
Six Lessons From the End-Game
1. Even as you start your Hispanic business, somewhere in the back of your mind, you will need to start thinking about an exit strategy.
2. That can be in the form of succession planning, disaster planning and it will probably even guide your development steps as you shape your company into something your daughter might inherit or a competitor might covet or a larger company might want to add to their portfolio.
3. Always give a lot of attention to IT–your business will depend on it. And you’ll also need a good insurance agent, graphic artist, commercial real estate agent and even a stock broker.
4. Access to good legal counsel will benefit you throughout your business life. Like it or not you have to protect yourself and defend yourself, and the best way to avoid litigation is to have had solid legal advice in the first place.
5. Whichever way you choose to move on, you will need good advice from both your CPA and your M&A lawyer.
6. The end game will take an emotional toll, so you have to keep the long-term view. You most likely won’t get everything you want, and you might be uncomfortable at the thought of change and being in a different organization, but such is life. Change is inevitable.